I have decided to vote against Initiative 1183 because I believe that it poses a threat to numerous small wineries, distributors, and wine stores. I believe that the effect on these businesses would be bad for the Washington wine industry and bad for me as a consumer. Here’s why.Let me start by saying that I am for liquor privatization. If Initiative 1183 were just about privatization, supporting it would be, for me, a no brainer - despite my distaste for the initiative process. However, Initiative 1183 is about much more.
First and foremost, Initiative 1183 is a battle of big businesses trying to use the initiative process to write laws that favor them/stop laws that don’t. Costco, Wine and Spirits Wholesalers of America, and other interest groups have spent over $33M to pass/defeat this initiative. We are all pawns in this game.
While this turns my stomach, it is not the reason I am voting against this initiative. The key component of Initiative 1183 from a wine industry viewpoint is that it removes uniform wholesale pricing and allows volume discounting. This creates an incentive for retailers to buy larger volumes of wine at a cheaper cost. I believe that this change may make it more difficult for Washington wineries to compete.
Washington has a very limited number of ‘large’ wineries. 27 of our 740+ wineries account for 90% of the total wine production in the state. Yes, these 27 wineries will be able to slug it out in a volume discount market with wines from California and other areas.
However, the vast majority of Washington wineries are small, family wineries producing less than 3,000 cases annually. These wineries simply do not make enough volume to make a profit by selling wine in large quantities at a reduced margin, unless their business model and marketing approaches completely change.
For many of these wineries, uniform wholesale pricing is what allows them to survive. Take this away and I believe it may be more difficult for many of these wineries to sell their wine. I also believe that it puts small distributors at a disadvantage, as they are the people selling these wines. Many of them will have a tough time in what will increasingly be a large distributor industry focusing on low margins and high volume. That does not help our industry. That does not help me as a consumer looking to buy Washington wine.
I also believe volume discounting will make it harder for Washington wineries to find a spot on grocery store shelves due a decrease in the number of available SKUs (See a comment from Dave E from a small wine store on changes they would anticipate at their store in the comments section of my blog here). Spirits taking up space would compound this issue. Again, that does not help our industry. That does not help me as a consumer looking to buy Washington wine.
Finally, I believe that Initiative 1183 puts independent wine and beer stores at a competitive disadvantage. First, it makes it difficult if not impossible for them to compete on price and potentially even increases the prices of small production wines if distributors charge ‘case break fees’ to encourage retailers to buy in larger volume.
Secondly, by requiring 10,000 square feet of floor space to sell spirits, Initiative 1183 not only eliminates the ability of convenience stores and gas stations to sell spirits – a good thing, it also eliminates the ability of small specialty shops to do so. To wit, even large Seattle-based wine retailer Esquin has only 7,000 square feet of floor space and would not be able to sell spirits (NB: A representative from Esquin indicated that they are against Initiative 1183 as they believe it hurts small wineries). Again, that does not help our industry. That does not help me as a consumer looking to buy Washington wine.
Is my position being protectionist? You’re damn right it is. Washington is not just any other state in the nation in terms of wine consumption and liquor laws. It is the second largest wine producing state and an emerging wine region with a multi-billion dollar wine industry. Isn’t that something worth protecting?
Perhaps I’m wrong and the industry would be fine if Initiative 1183 passes. Perhaps over time, as the industry evolves, volume discounting might present less of a threat. But implementing this significant of a change during the worst economy in 70 years probably isn’t the best time to find out.
Some proponents of Initiative 1183 have said, ‘The government shouldn’t tell me how to run my business.’ Would you rather have Costco telling you how to run your business? This is what Initiative 1183 does. It lets Costco make laws that help their company at the expense of smaller businesses that can’t afford to have laws made for them. To me, that is something we should all be protecting ourselves from.
I know some of my readers have opposing views on this initiative, and I respect those opinions. I realize that some wineries in Washington, including some small ones, might benefit by passage of Initiative 1183. However, I am trying to consider the industry as a whole – which I hold dear – as well as my own consumer interests.
My hope is that, with the series of posts I have written on 1183, I have provided you all with enough information to make your own, informed decision, based on the things that are important to you.
For me, I’ll be voting no, and if you love Washington wine, I encourage you to do the same.
Note: Read a series of posts about Initiative 1183 here.
I love Washington wine, and will be voting yes.
ReplyDeleteCostco and WalMart are not where I buy wine. The fact CSM wines will be sold there for a few dollars less then they are today is irrelevant to any wines purchases I make during a year. The selection at Costco is terrible and no threat to any serious wine shop. The people who will buy the cheapest wine always have two buck chuck, jug wines etc...
Do I want Esquin selling spirits? No. I want wine, not vodka.
Can I think of any reason a small winery is suddenly unable to sell wine to Esquin if this passes? No, I cannot.
Is there anything in this initiative that prevents a distributor from representing small, boutique wines? No.
Do I find the ads against this initiative distasteful? Yes, the "teenage" drinking thing is bogus and an insult to my intelligence.
Your virtual tasting tonight features Rulo. I love their wines and will continue to buy them. That won't change because this initiative passes.
My experience with Micro sized Wineries leads me to think that there will be no appreciable impact. Most operate without store presence. This State has NO Business being in the Liquor Business!
ReplyDeleteMom & Pop Stores will continue with Wine displays, just no Hard Liquor...A whole different product line.
I agree with Larry and Tom, people who drink small winery wines seek them out, whether they are at Costco or a wine shop, or the winery we seek it out. I go to Albertson's over Safeway because of the wine selection. I think this initiative might even bring more wines to Albertson's with volume discounts, perhaps from other countries. The more the merrier.
ReplyDeleteSean, on this we will have to agree to disagree. I've posted my thoughts on my blog this morning (before reading yours, so my thinking is completely my own). I am voting yes. I just don't see the negatives that some small wineries (and craft distillers) are predicting. Apparently the 100+ members of Family Wineries of WA don't see the problems either. It would be very helpful if the WA Wine Commission would take a stand on this Initiative, rather than leaving the hard work of sorting it out to the bloggers, but I won't hold my breath. However, if 1183 loses, I'll buy you a beer next time you are in Waitsburg!
ReplyDeleteI agree that the state has no business selling liquor and that spirits sales must be privatized - although I never drink them.
ReplyDeleteTo turn a phrase from Senator John Kerry, I was for Initiative 1183 before I was against it. I originally gave the initiative a quick skim back in the summer and thought it was an improvement over 1100, despite the inclusion of volume discounting. Wanting spirits to be privatized, I drafted a post back in August that I planned to put up this week endorsing the initiative. Then I researched the issues and talked to people and my opinion changed.
In terms of the effects on small wineries, distributors, and retailers, I can only say that my decision to vote no on Initiative 1183 has been strongly influenced by talking to these people and hearing what they anticipate the effects to be for them. Even people with larger wineries who believe volume discounting might help them told me that they were voting against Initiative 1183 because they believe it would be bad for the industry. This response was not just from a few people but from the overwhelming number of industry people I spoke with - although 1183 does have its industry proponents.
Ultimately I see two possible scenarios that could play out with Initiative 1183. The first appears to be what several commenters feel will happen - a ‘divided earth’ scenario where Costco and large grocery stores own the high volume, low priced wine segment; small, independent stores own the low volume, higher priced ‘boutique’ wine segement; and both coexist in separate niches.
The second is the ‘conquered earth’ scenario. Smaller, independent wineries, distributors, and retailers are unable to survive because they cannot compete on price and large retailers bleed away enough of their customers and profits to make their business unsustainable. Unfortunately, this is the scenario people I spoke with felt was more likely to occur if Initiative 1183 passes.
If initiative 1183 passes, time will tell which way it plays out.
Paul G, it's a deal!
ReplyDeletebut i still don't understand why, in this year's initiative, wine is targeted for deregulation? while beer is not? is it the alcohol level?
ReplyDeleteThanks for giving me an answer Sean. But I thought that last year's initiative did include beer. So if 1183 passes, then we can probably expect an initiative to deregulate beer? and if 1183 does not pass, next year's initiative will finally be just be about liquor?
ReplyDeleteRowena, you are correct that Initiative 1100 would have allowed volume discounting for beer as well. To me, this makes it quite interesting that it was taken out of 1183 but wine was left in. My belief - not based on any information or data I should point out - is that the initiative writers anticipated they would have a more difficult time getting this initiative passed if it included volume discounting for beer because beer lobbies would put in money to oppose it. This is a very, very powerful lobbying group.
ReplyDeleteIf Initiative 1183 passes can we expect to see an initiative in the future allowing volume discounting for beer? I would expect so.
If Initiative 1183 fails, will Costco write another initiative that just focuses on privatization? This is a very good question. Personally, I would like to see the state legislature take it up and do the job because it needs to be done. If they don't, I'd be fine with a initiative that looks strictly at privatization.
However, I personally believe that Costco made a substantial mistake by putting this initiative on the ballot so quickly after Initiative 1100. Many people I have talked with are planning to vote against this initiative because they feel like they already voted against it last year. There is a lot of voter frustration with the way corporations are using the initiative process. If 1183 fails, Costco may try again but I believe that it's chances of succeeding will be more reduced due to voter anger. They have made a big gamble - and thrown in a whole lot of money to try to make it pay off. We'll see if it works out for them.
Hi Tom,
ReplyDeleteSpeaking from one Tom to another, I have to disagree with the doom and gloom scenario your winemaker friend passed on.
First, his peers are going to be faced with the same decision. They all have rent, oak barrels and grapes to pay for. Costco wants to sell wine, and it is up to each winery to decide if it makes economic sense to sell more wine via the Costco sales channel (higher volume, lower per unit price). It's math. It might work for some, not for others. It takes place in the business world every day. Wine is not unique here. Can we agree with this?
Second, I take issue with a winery who believes their success as a business is predicated on Washington enforcing no volume discount. Really, this is the business model they put together when they started?
What happened to offering a quality product at a good price? If you make good wine, people like Sean will make sure the public finds out about it. And then I'll drink it :)
I sample lots of WA wine from "small folks." I see very few "small folks" wines sold in Costco.
The reality is the big brands have always outspent and outmuscled the small wineries when it comes to shelf space, grape contracts, marketing etc... My advice to boutique wines?
Make good wine. Get out there and promote it. Believe in what you sell.
I am excited as well to have a place where people are having a logical, thoughtful debate on the initiative. I am for I-1183, but I, as hopefully most of the people here, have not decided my position and "that's that", I enjoy hearing other viewpoints and different considerations on the topic.
ReplyDeleteFirst about the store size and lack of beer wholesaling. As Sean mentioned this is entirely because of the last campaign for I-1100. Costco/Safeway/Trader Joe's took on an too powerful of opponent in the beer industry.
The beer industry pumped in money against the initiative, and their rallying cry was that corner stores sold alcohol to minors at a higher rate than state stores.
After 1100 was defeated 53% - 47%, 1183 reacts to this by not provoking the cash heavy sleeping giant that is the beer industry, and removing the argument that corner stores will be the downfall of minors sobriety by requiring a square footage to be eligible (in most cases).
The first "Costco Initiative", I-1110, shows that Costco didn't want to keep Mom 'n Pop shops out of the equation, but instead they were forced to be opponents of the measure.
As for the volume price discounting, no other industry get governmental protection against volume pricing, and yet there are small, locally owned shops that survive, even thrive! The fact that Quizno's and Subway can buy turkey cheaper than Twisted Cafe hasn't shut them down.
I don't know which small wineries feel that the only reason people are buying their wine is because it's cheaper than the others. But lets be realistic here, if Costco was solely focused on bringing in the cheapest wine they could, they can already do that.
The current law prevents volume discounting, not buying cheaper product.
I understand that anytime there is a shift in governmental protection for an industry, people/businesses in that industry get worried.
But I don't think there is any real validity to the dooms day scenarios many people seem to be painting. I don't agree with people who are essentially saying "It's not fair because if people can buy liquor at the store then they wont HAVE to buy my wine instead". Created a market by limiting consumer choice never a good thing.
This is insane. How many small wineries are there in California? A million? More? Many many are thriving. Esquin will be fine, as will the vast majority of small wineries. If a business requires the government to run liquor stores for them to survive, they should be allowed to die on the vine. Vine?! Get it?
ReplyDeleteAnon, the comparison of Washington to California is a good one to bore into. California has about ten times as many wineries as Washington and 25 times the production. It also has a much more mature industry in Washington, given that about 500 of our 740 wineries were founded in the last ten years. We are a young, mere speck as an industry in comparison - although of course we kick California's butt on quality. ;)
ReplyDeleteCalifornia’s high volume production and large number of wineries allows them to compete across a broad range of price points. California can provide wines as easily at $3 as they can at $300. Washington cannot. Volume discounting probably helps many California wineries compete because they produce at large volumes. Washington does not.
The stratification of the California industry with numerous high and low volume producers and everything in between makes it a better place for 'Scenario 1' in my earlier comment where these producers are able to coexist. Washington may evolve in this way but I don't believe we're not there right now.
I don't believe that Washington wineries require government liquor stores to help them survive. On the contrary, I believe that liquor should be privatized and that Washington wineries would do as well or better than they are now. However, I don't believe that volume discounting should become legalized and think that it has no place in the privatization discussion. It's a shame that the initiative writers put it in there because it gets lost in the shuffle. Perhaps this was intentional?
Paul,
ReplyDeleteIn response to your reference to the Washington State Wine Commission from your earlier comment, the Commission is the industry's marketing organization, and as a state agency, it is explicitly prohibited by state law from taking any position regarding ballot initiatives.
Regards,
Ryan Pennington
Washington State Wine Commission
It seems to me that a lot of the concern about the smaller wineries in Washington may be misplaced. While you may see them represented somewhat in a Safeway or the like, not so much at a Costco or WalMart. In fact I would be interested to learn how many of these wineries really rely on the big retailers or distributors to sell their wine as apposed to the specialy shops, restaurants and their own retail and wine club channels. If such a small percentage of our Washington wineries make up the total volume of wine produced and sold in our state, then let the big dogs bark and bite and let the rest go on as they have done or a slightly modified version of going to market with specialty stores and distributors or direct! People that have an appreciation for great wines know how to find them. Doing business with Costco is not a pleasant experience no matter how tempting the volume may be (or claimed to be)and in my opinion, most wineries, especially the smaller ones, shouldn't lose any sleep over the perceived opportunity there.
ReplyDeleteSean, I'd say my outlook is somewhere between your #1 and #2 scenarios. If I-1183 passes, I don't see the small producers/sellers going away, but at the same time, I see the small part of the market getting smaller, and the big part getting bigger and stronger.
ReplyDeleteAs several people have noted above, Costco doesn't really figure into the argument as far as I can see. They don't sell wine from small producers now, and I don't expect them to start doing so anytime soon. The mechanism for the shift in the market is different than that. What I see happening is that with passage of the initiative, the conditions will be right for entry into the market of the big-box liquor sellers - BevMo and Total Wines, among others. They offer large selections of wine, tailored to appeal to the average shopper, who choose wine based mostly on price. These are the stores will probably take market share from the small suburban wine retailers and put quite a few of them out of business. In-city wine retailers might have a chance of staying in business, just because most city-dwellers won't have any interest in driving out to the suburbs in order to buy a discounted bottle of wine.
It's the small shops who have traditionally offered a place in the market to the small wineries - the big-box stores won't be much more interested in them than Costco is now. But, with a substantial number of small shops going out of business, the small wineries will have to change their business plans and figure out how to make a living with more tasting-room and mail-order sales and less retail in the mix. Some will figure out how to do this successfully, and some will fail with a lower level of retail support.
I haven't done a great deal of research in California, but my impression matches this model - I didn't see many small wine shops in the suburbs. In fact, ignoring Kermit Lynch's store, which is a special case, I only saw one small wine shop during my whole trip last summer, it was in the middle of Berkeley, and it certainly didn't look like a prosperous place. Obviously, California has lots of operating wineries, and there is a lot of diversity in their business models and markets. There are even some small wineries that go somewhat to the European model of being family-owned and maiking inexpensive, decent wine. Like in Europe though, they looked like very mature operations, something that is notably absent in the Washington market. As Sean speculates about, can our young, tender wine industry develop into a strong, mature one in a large volume-low price marketplace? Maybe it's possible, but we'll probably lose many more wineries - even many of the good ones - along the way than we would under the present regulations.
I am in favor of 1183. The bottom line is let's compete. I want nothing to do with Costco and most of the deep discounting but if I need to I want the opportunity to do so. Don't tell me as a business owner and a maker of wine what I can or cannot charge for my product. Let the market determine that. Besides, I am tired of not being able to find the great small producer spirits that I long for and must buy from distillers when I am in that state because our antiquated post prohibition system will not allow me to buy those products using our current system. Let's step forward into the modern age of business and alcohol in Washington for the future.
ReplyDeleteI am a newbie in the wine world as you know Sean, but not necessarily in business. As a conservative capitalist... I too say get the government out of the way and let's PLAY BALL! Antiquated laws to protect the small often do more damage, as many above have stated: make a quality product, put it in a quality bottle, and sell it with pride! Customers will come back.. and they will tell their friends as well! -coop
ReplyDeleteSean,
ReplyDeleteThanks for keeping us on top of the intiative. I am in the same lines as Tom Hajduk and Dave E, but i would like to add something to the discussion...We are a nation of convenience...Put everything in one place and let the hordes of people come running!!! Why isn't anyone talking about corporate america and it's greed. Costco, Walmart, Sam's Club...you name it, they've got it...allowing them to bargain on volume discounts on wines and liquour makes my head spin and cannot be good for you or I (IMPO)
I know costco does sell some small WA winery wines and will continue to find more as long as we have small wineries allowing it. The question I have goes out to the small winemakers out there...who do you want selling your wine?...A corporation that knows nothing about your wine, nothing about your product and nothing about you? Or would you rather have a retail wine shop who can tell the customer about the wine, where it came from, how they met the winemaker and walked through the vineyards with him/her, and most importantly....how the wine tastes??! You aren't going to get that from a Costco...but as I stated above...we are a nation of convenience! This idealogy and mindset will hurt the small wine shops and eventually run them out of business. It won't be sudden but it will eventually happen.
Charlie and Neil, do you care about your product and what your label stands for or do you just want to try making the cheapest juice and sell it to people who don't know the difference? Because that's what your going to have to do when dealing with costco and corporate america.
First, Sean thanks for your research on I-1183. Love the discussion going on here.
ReplyDeleteSecond, I agree with Chip, “…TRULY look at all of the details…”
One of the details is shelf space. When grocery stores start selling liquor, Washington wineries WILL lose shelf space. I know that many local wineries depend on that shelf space for income and for brand exposure (it takes a great deal of effort to win that space in the first place). While I love visiting wineries, most of the wines I purchase are at my local grocer. If I-1183 passes, how many of those bottles of Washington wine will be displaced by bottles of liquor and volume discounted wine? Having shopped at grocery stores in California, I suspect many.
Also, I’d love to see small, independent liquor stores selling specialty spirits. But requiring a business to have 10,000 sf of floor space won’t allow that to happen. No, I don’t want the mini-marts and gas stations selling liquor. But couldn’t the pre-existing WSLCB stores be grand-fathered in somehow or sold to private owners? Sure, I shop at Costco, but I’m not worried about them.
I started off as a fence sitter on I-1183. After reading and thinking about all of these comments, I’m now against I-1183.
So as we look at other wine states, say California, has their lack of a Liquor Control Board and the presence of Costco driven all the small producers out of business? Yes, prices going down will drive some out of business, and I hate to be cruel, but businesses have to have a sustainable business model that will allow them to compete and thrive.
ReplyDeleteSo I do buy wine at Costco. But I also buy at a number of other locations because Costco doesn't have what I want. This makes me believe that there will be a continuing place for distributors; one in which they continue to work in the interests of the smaller producers and work to get their product onto store shelves. What won't continue is their existence because of an outdated three-tier model that is mandated by the state. In other words, they will have to provide real value.
FUD, fear, uncertainty and doubt. I feel that a lot of the concern about these changes cook down to 'we know the current system is bad, but we understand it'; 'the new system may be better, but we're scared because we don't know'.
It's time to get the fox out of the hen house. I refuse to sell wine to the WSLCB; they don't go thru Distributors, they have a central warehouse and they always want a special price, and them they undercut the rest of my customers. They should do what Government agencies are supposed to do, enforce the regulations, and I as a producer should be able to do what every other producer in the state does, set my price and chose my customers. That has worked well in the other state in which I sell wine.
ReplyDeleteAh, Washington - as a Californian in the wine business (who's also worked in Washington) I can appreciate both sides of this discussion. I remember one of the first times I worked the WA market seeing a wine shipper from a California retailer outside of a WA store - it was cheaper to purchase the wine in CA and pay shipping to WA than it was to purchase it in WA!!! Distributors in WA have it much easier because they're paid upon delivery - that is one of the explanations for the much larger number of distributors. As far as volume discounts, yes, the Safeways and QFCs and Costcos will have better pricing on "commercial" brands, but the hard-to-get wineries will still sell their wines for the same wholesale price - it's up to the individual store owners to determine the retail price, and that's where the game will get interesting.
ReplyDeleteOne of the replies commented on the dearth of "good wine shops" in Berkeley - well, yes, there's Kermit Lynch, but I can agree that on a per-capita basis, there are signifiantly more "mom and pop" good wine shops in both WA and OR than there are in CA. Our business has developed to a tiered market, and we have the top-end stores throughout the state (K & L, Wally's, Wine House, Wine Exchange, Beltramo's, etc) that have phenomenal selections, we have smaller local "mom & pop" stores that can still have an interesting selection, and we have the vast majority of local liquor stores that sell the same tired merchandise from the large distributors - in CA that's Southern and Youngs.
As always, there are valid arguments for both sides - but I think the vast majority of Washington wine consumers will benefit from passage of this ballot proposition, and believe it or not, the wineries will continue to grow and prosper as word gets out about the great wines being produced in Washington. Good luck!
I open with a quote from the most recent report on the California wine industry that I am aware of:
ReplyDelete“Falling profits and valuations of winery operations will push the smallest and most specialized operations out of business or make them candidates for acquisitions.” (Sonoma County Economic Development Board 2010)
And the report also notes that consumption of wine has INCREASED. Therefore, price and market share are the two biggest factors for success.
Yes, there are a lot of wineries in California. But it’s only the high volume ones that are growing. The small producers have either gone out of business, selling their vineyards to larger producers, or are still in business and also selling their work to larger producers. One is NOT seeing an increase in small winery labels in California stores because of de-regulation.
California may look successful, but quality has definitely taken a hit in terms of what is available without actually driving from winery driveway to driveway. One of my favorite sources is a 2008 New York Times Article, which notes that in 2008 there were 2,687 bonded wineries in California. And before you think that helps the argument of “California must have benefitted,” here's the most important quote excerpt from the NYT article:
"The 25 largest California wineries produce 90% of the state's wine."
The smaller facilities are only 10% of the market, and in many cases, smaller wineries/vineyards have to sell their grapes and juice to the enormous wineries/corporations to make ends meet. One of the larger companies, for example "The Wine Group," (which makes Two Buck Chuck) makes over 25 million cases a year. So, no, the small wineries are not “thriving,” they are “surviving” by selling their stuff to the big wineries.
Here’s more context from economic report for Sonoma County Wine County in 2010, which was produced for investors in the wine industry, not by the wine industry itself. It is very telling about the climate right now:
“Falling profits and valuations of winery operations will push the smallest and most specialized operations out of business or make them candidates for acquisitions. Wineries that manage to diversify their offerings-especially with lower-cost wines or with wines grown in lower-cost areas—will be better positioned to maintain profit levels in the near term.”
Yes, some of the issue is that the economy is bad. But interestingly enough, the report makes a strong point that consumption has increased. So, the wineries with “big market share” and who can “capitalize on their pricing affordability” will survive. The others will not.
Here’s the conclusion of the report:
“A lack of diversification between high-priced and lower-priced wines would hinder Sonoma County’s winemakers’ transition into a structurally changing wine market. Producers from lower-cost, wine-growing areas of California have been able to increase retail market share during the recession and the initial recovery period. They have also been able to capitalize on their pricing affordability in order to enter into new distribution channels—including national restaurant chains and airlines—that will increase their exposure to new wine drinkers.”
Bottom line: the wineries that already have the bigger market share and the profits to make a large volume of discounted wine will survive, the others will not. It’s an ominous line and delivered with such neutrality, but to repeat the report’s conclusion again: “Falling profits and valuations of winery operations will push the smallest and most specialized operations out of business or make them candidates for acquisitions.”
Passage of 1183 lines things up for exactly the same situation. Right now the small wineries are just making it.
Folks, gas has gone up. Shipping charges have gone up. How much more pressure can we put on small businesses? How are they to get their product out there to consumers and still make enough money?
Incredible dialogue here everyone. I truly appreciate all of the though and time most of you have put into this.
ReplyDeleteI too am very on the fence about this though what I've been reading here is tipping me towards "No". I realize that there is a lot of FUD being discussed. However, looking solely at the physical realities of this (i.e. loss of shelf space for local producers, etc.) I believe that this particular initiative is NOT the right one to begin the deregulation process. Now the question becomes, how do we get the right one place? Is it something that the WA state brewers, wineries, and small distributors can collaboratively work on? I'd love to see that happen and you'd have my full support!
Here's the thing: The state shouldn't be in the retail business, but our legislature has been completely inept at getting out. That means it must be done through initiative. LAST year's initiative didn't have the 10K square foot limit that would hurt your mom 'n pop wine shops. Distributors did two things: Put on a fear campaign of teens dying fiery drunken deaths and put their own confusing liquor privatization initiative on the ballot. The idea wasn't to get it to pass, it was to get Costco's to NOT pass.
ReplyDeleteSo THIS year's initiative has the 10K limit, because that's what opponents said they wanted. Vote YES on 1183 to get the ball rolling...legislation is a process and this will get it going in the right direction.
Unknown: voting for 1183 will not get things going in the "right" direction. It will get things going permanently in the corporate direction, removing power from smaller organizations and businesses and giving it to a few if not one large one. Once we go down the road, it is one way and there is no coming back. This is related to how citizens just bailed out the banks and the citizens paid for it. You think that’s coming back to us someday?
ReplyDeleteLast year’s initiative had three major points that people did not like:
1) taking away state control liquor revenue was not compensated by some sort of reciprocal income.
2) Small liquor stores were allowed, and the anti-initiative campaign made it sound like there would be liquor stands on every corner just like coffee stands.
3) Small wineries and small distributors would be hurt by “split case” charges (small wine shops would no longer be able to order 1 or 3 bottles of this and that for customers by request) and non-uniform pricing (larger stores can leverage their buying power because they have large amounts of capital).
This year’s initiative was indeed written to dodge the opposition from last year, and the supporters of 1183 hired some brilliant, very high-paid out of state people to run the campaign using polarizing vocabulary and very clever tactics. But the initiative is still not good for the state or the diversity of the wine industry. And voting for it will not be a baby step towards better things. It will be selling our state and wine industry to someone else.
Only a refusal of 1183 will mean the right kind of change down the road is possible. If we don’t like the state running liquor stores, let citizens, small business people, and corporations write a new initiative. I’m on board with that. Any lawyers out there who want to have a go?
Ryan - maybe the Commission is prohibited from taking a position, but I cannot see why you are prohibited from hosting an informed discussion. To all the no-sayers on this board, please take a moment and look at the story in today's Seattle Times regarding the law - already passed - that will go into effect if 1183 fails. Most of your arguments fall apart in that scenario. It may be true that the devil you know is less scary than the devil you don't know, but I remain solidly in the yes camp. Open up the market. Costco will sell a tiny percentage of wine and booze cheaply. The rest will have plenty of other places to go with their brands. And consumers will be able to find what they want, where they want, and when they want.
ReplyDeleteWith permission i have passed along a comment by Paul Portteus..
ReplyDelete"I would consider voting "Yes" on the bill if it was straight forward bill putting private enterprise in charge of liquor in WA but this bill is not simple. It goes into areas of importation and distribution that should not be subject to public vote and would be better addressed by our elected representatives. This area of the bill upends the 3 tier system which is an anti corruption device to keep any tier of Producers, Distributors or Retailers from dominating any other tier and monopolizing the industry. All states agreed to this to end prohibition. Costco and other corporate giants will under this plan be able to import, self distribute (central warehouse) and retail all wine and liquor bypassing the existing distributor system. If all the national and international brands sell direct to these corporate giants the existing distributors will not be able to sell these products as they will buy them at the same cost or more as Costco. Without the large brands to distribute the distributor tier will be in deep trouble as they need the big brands in order to carry the smaller ones in their books. I believe this initiative if passed will be overturned by the courts because it affects too many separate issues bundled together. It is a Trojan Horse initiative that purports to "get the State out of the alcohol business" when what they really want is to self import, central warehouse and allow retailers to sell to retailers and of course sell and distribute booze! Sorry, I'm voting "NO".
All, this was just posted by an anonymous commenter on my post about Volume Discounting. I'm including it here as well given its relevance to the discussion.
ReplyDelete"A number of posters have maintained that Costco isn't really interested in small wineries. Well we produce less than 4,000 cases a year, spread out between a couple of brands and almost 2 dozen skus. We have a wine in several Costco stores right now that we only made 400 cases of. Could we offer it at a lower price? NO. Could we live without the sales to Costco? YES, but in this economy it would really hurt. I'ts not easy moving those over $35 wines, no matter how great the quality."
Voting "Yes". I am with Paul G. and Family Wineries of Washington on this vote. Perplexed by the difference of opinions held by those in the Washington Wine industry. Bothered by the ad compaigns. Love Washington wines and admire the growers and winemakers and educators who have helped me. It is just time to get the State out and allow the market to work. There will be those that buy at Costco & Trader Joe's, but I am confident of the consumer market for well-made fair priced wine at groceries and wine shops.
ReplyDeleteI'm just lost, since when did we feel the free market was a bad thing?
ReplyDeleteLets walk through a scenario here. Costco/Safeway/Trader Joe's wants to carry several WA wine SKUs, because their customers like it and buy it.
I-1183 passes. And these larger retailers come around saying "We really want to carry your small winery wine, but we want a discount" and you say "Can't do it, my margins are too thin".
This, apparently from what I'm reading here, is the case for EVERY small WA winery.
Therefore I am supposed to believe that Costco/Safeway/Trader Joe's will STOP carrying any local WA wine because they can't get a larger discount on it? That if I-1183 passes, anytime I am in the store I will only see Ste Michelle and Columbia WA wine?
Does this actually make sense to you?
William Pollard wrote: "But couldn’t the pre-existing WSLCB stores be grand-fathered in somehow or sold to private owners?"
ReplyDeleteActually, they are grandfathered in, even though none of them are over 10,000 SF. So they can continue in those locations, but someone would have to purchase them, I assume.
Catie wrote: "Now, I do not qualify to sell exclusive spirits because I do not have 10,000 square feet of floor space (of course to "protect the children"). So not only am I screwed by Costco because I cannot compete with their wine prices, but I get screwed again because I cannot compete with them for floor space to sell spirits."
Costco showed last year that they were willing to have small stores also be licensed. I wouldn't blame Costco for getting 'screwed' by the square footage requirement, this was changed in response to the opposition's concerns, not Costco trying to push small stores out.
Many other good points have been made here on both sides. I'll bring up one FUD element that I haven't seen discussed, wherein the opposition is claiming that there will be four times as many stores, and yet no additional enforcement personnel. This is just another scare tactic that doesn't stand up to rational thinking. Who do they think will be getting these additional licenses, Toys R Us? No, they will go predominantly to Costco and large grocery stores. Those stores already have a license to sell beer and wine, and adding liquor requires no more enforcement than they have today.
I've cast my vote in favor.
Sean,
ReplyDeleteBoy are you all wet on this one buddy.
Fist to respond to Tom H's comment, the Board of Family Wineries of Washington unanimously supports I-1183. We made this recommendation to our members in asking for an advisory vote. The response was overwhelmingly in favor. Note that this does not mean all members of our organization support I-1183. That's democracy.
As for your comment that this is bad for consumers. Huh? Ok, wineries can have differences of opinion on whether or not this is good for them. But explain to me how a volume discount could possibly be bad for consumers.
As far as the changes proposed, nothing prevents me from discounting my wines right now - as long as I do it uniformly. And nothing under the current system prevents Costco from kicking the snot out of small retailers under the current system. This is in fact why I don't sell to Costco and don't plan to regardless of whether 1183 passes. There's wine out there for $3 (so called two buck chuck which costs an extra $1 per bottle to ship to Washington). There's decent wine out there for $10. I couldn't sell bottled water profitably for that price. I'm not going to compete on price with these guys, period. "Posting off" my prices (temporary price reductions) are purely and simply an erosion of my price point. That's a one way trip. So why is having my hands tied on creative pricing arrangements good for me?
These laws were written by and for the people who deal in high volume and low margin. And by people who make their living delivering, not making, wine. Think about it Sean, A wholesaler has has 150 brands and sells two bottles of each brand to a store. That's half a pallet of wine. I have one brand. How far can I drive two bottles of my brand at $0.55/mile and not be in the hole on the transaction, even if I eat the cost of my time? So why shouldn't I be able to charge for delivery, or waive such a fee if someone increases their order to, say, a case?
The fact is, many retailers don't carry wine right now if it's sold in Costco. I totally understand that and that's why I don't sell to Costco. A good friend, on the other hand, says, the heck with small shops, he'd rather sell to Costco than thirty small shops. Why is it a problem for me if he wants to pursue that business model? I do hope that specialty beer and wine shops will one day gain an exception to the 10,000 square foor rule.
Protectionism is an absurd concept. You can't "protect" anything in a global economy, least of all the washington wine industry. You can encourage it with sensible policies, investments in research and infrastructure, and laws that don't penalize the strengths of small wineries (context, locality, identity, customer service, and nimbleness) in favor of those models that depend on on high volume and low margin. If protectionists had won the day in 1969 and rejected the California Wine act, we would have no modern Washington wine industry, and Washington consumers would still be drinking wine made from apple peels (As you are probably aware Sean I am not, as a mater of historical fact, making that example up).
I certainly hope I-1183 passes. When wineries realize the benefits of this small ray of freedom they will be more amenable to questioning the rest of the restrictions (some would argue protections) on our indusry including co-advertising bans between wineries and their customers and co-mingling of ownership and different license types. The legal bars that have been built around the young tigers of the Washington wine industry were not put there to protect us from those on the outside
John Morgan
Lost River Winery
Secretary/Treasrur Family Wineries of Washington State (Speaking for myself)
Why is no one saying anything about the the opinion piece in the Seattle times Oct 27, that says voting NO will not retain the current system but allow a private buyer of the system? It appears we are about to be fleeced again, but this time without any notice and paperwork already signed by the Governor. Here is an excerpt from the Oct 27, 2011
ReplyDelete"One more reason to vote 'yes' on Initiative 1183"
ONE of the best reasons to vote for Initiative 1183, which would end the state liquor monopoly, has been little mentioned in the debate so far. If I-1183 fails, the state will likely subject itself to a private liquor monopoly — a dubious adventure in crony capitalism.
The bill to do this is already law: Engrossed Substitute Senate Bill 5942, quietly signed by Gov. Chris Gregoire months ago. Under this law, the state would turn over all liquor wholesaling in Washington to one private monopolist. This company would be the exclusive supplier to the state liquor stores, probably for 10 years.
Why would the state create a private monopoly to sell to itself? For money. For lots of money, up front, to help the state with an immediate problem. The original proposal, from political operative Tom Luce of Tacoma, suggested that investors would be willing to pay the state $300 million for such a concession. In return, state and local governments would have to live with sharply lower liquor revenues for the following decade.......
We need to understand the details of this.
Both my Seattle and Portland Distributors have "delayed" their usual fall orders pending the outcome of I-1183. When I inquired as to their plans for their usual fall orders, they each independantly made a similar statement of "holding off to see if this initiative passed". We agree that shelf space will shrink considerably because many of the retailers I/they sell to today have plans to expand shelf space for hard liquor and reduce space for wine because they will make more from the hard liquor sales. Sure, they (retailers) will still sell (WA) wine, but they will be much more selective and it will largely be based on price discounts. I produce 1,500 cases a year and I am voting NO (due largely to the pricing segment of this initiative) despite my desire - as most all of you - to get the State out of the liquor selling business.
ReplyDeleteI'm not opposed to getting the state out of liquor sales, I'm just opposed to this proposal. It's a bad law benefiting Costco and other larger chain retailers at the expense of distributors and smaller non-chain retailers. How? Under this proposal, Costco could control every level of the distribution and sales channels. They can re-sell to other retailers & restaurants. 1183 hands these guys the keys to the liquor kingdom. Privatize yes, but not under this bad, lopsided legislation.
ReplyDeleteI have voted YES, as has my wife. Any message we can send to state employees which reads, "WE ARE TIRED OF CARRYING THE LOAD", gets my yes vote. As a taxpayer I take offense to cashiers working at government run liquor stores, making nearly 20 bucks an hour, while garnering full benifits for themselves and extended family members.
ReplyDelete